Preparing for the Second Half of 2022
Originally appeared in Fleet Owner
After an optimistic first quarter, the economy has hit roadblocks. Fleets must consider component shortages, build slots, and labor supply in the following months.
If you were judging the second half of 2022 for the fleet industry by the first quarter, the year looked promising. Aside from major supply chain issues, freight was plentiful and fuel prices were low relative to today.
The second quarter of 2022 has been a little more uncertain. Supply chain challenges continue to be problematic, as many truck makers have not delivered on 2022 sales and have not opened their 2023 order boards due to a growing concern of 2022 production bleeding over into the first quarter of 2023. Fuel prices are at record high levels, interest rates are soaring, and ocean freight from Asia has slowed significantly.
Record inflation and supply-and-demand issues means new equipment, if you’re lucky enough to get it, costs much more. Due to the massive increase in fuel costs and the softening of spot rates, the once-hot used truck market seems to be cooling off as used truck inventories build. Owner-operators, who are the typical used truck buyers, cannot maintain profitability, and many are opting to exit the industry. As a result, prices for used trucks, although still high, have declined.
The finance industry is still in a fight over equipment volume because new equipment is still being hamstrung by supply chain issues. Shortages abound for microchips and other vital components needed to complete new orders and keep existing trucks on the road. Adding to the turmoil is the burgeoning labor shortage.
What does the second half of the year hold? With a growth in new equipment deliveries will come an increase in funding volume. New equipment and new equipment financing are practically set for the balance of this year. The only unknowns are component supply and the labor force. The outlook for more people to re-enter the labor market is still somewhat uncertain.
See also: Truckload, reefer volumes slip in May
If the supply chain issues ease and new equipment deliveries accelerate, used inventories will grow, putting additional downward pressure on pricing. With interest rates rising, the decision to buy new equipment in 2023 and 2024 will become more critical.
The second half of the year most likely will be the opposite of the first quarter. But we must wait to see what happens over the next six months to determine realistically what 2023 is going to look like. Will things settle or will this whiplash effect continue?
One thing to ponder: If the economy slows down, the manufacturers can catch up. Without red-hot demand, they can better deliver what they have already sold.
As we enter the second half of the year, navigate this unpredictable market carefully. There is uncertainty surrounding interest rates, the cost of equipment, and the availability of equipment. Make sure you are strapped in. It’s going to be a wild ride.
At Corcentric, we stand ready to help any fleet bridge that gap. To learn how we can help, contact Corcentric today.